Ever since the expansion of corporates and MNCs setting up operations in Mahindra World City and on GST road, there has been a sudden spurt in the number of techies and other skilled professionals employed in and around the area leading to a surge in demand for rental accommodation.
The major work centres on GST are Mahindra World City on a sprawling land area of 1550 acres, Shriram Gateway, an SEZ and L&T Arun Excello’s Estancia. While the residential units coming up on IT corridor caters to the demand of techies on OMR, those employed on GST road will have to invariably look at city areas or other suburbs.
There are quality housing units like the Akshaya Belvedere, L&T Arun Excello’s Estancia, Mahindra Lifespace Developers’ Iris, Hallmark Infrastructure’s Hill County and South India Shelters Safaa but they are rather limited to bridge the growing mismatch between demand and supply in housing.
For instance, in the Mahindra City alone, Infosys has a land area of 129 acres and operational space of 4 million sqft, Capgemini with 25 acres land and operational space of 1 million sqft, Wipro Technologies with 92 acres land and development potential of 4 million sqft and Mastek with 16 acres of land and development of potential 0.7 million sqft.
Infosys alone currently employs 7000 people in Mahindra World City. The demand is getting aggravated from Capgemini in Shriram Gateway and other companies in the corridor. The expansion of these enterprises and the influx of more professionals in the coming years would necessitate the need for improved housing stock.
According to industry sources, OMR and GST road together have 6 non-captive IT/ITES SEZs with 83 per cent occupancy levels. And GST road has 5.1 million sqft of operational captive space including Shriram Gateway and L&T Estancia. It is said that the IT/ITES companies in Mahindra World City would continue with their captive units in the coming years.
Though GST road has airport connectivity and a well-developed business infrastructure, it lacks social infrastructure including retail malls and entertainment options. But Aerens Gold Souk in Vandalur and Abhirami mall in Mamandur may change the skyline of the retail scenario in the area. Besides, malls are coming up in Shriram Gateway and Estancia apart from Laurel Mall.

“Indian economy will become a $5.6 trillion economy by fiscal 2020, at current market price, from the $1.73 trillion in fiscal 2010-11,” Dun & Bradstreet India Senior Economist Arun Singh said.

The rate of investment, consumer expenditure and infrastructure spending will be the driving force behind the country’s economic growth over the next 10 years, he said, adding that these conclusions are part of a D&B report — titled, ‘India 2020′ — which is scheduled to be released tomorrow.

The share of discretionary spending is projected to increase considerably to 72 per cent of private consumption expenditure from around 60 per cent in FY’10.

Besides, the share of the services sector is expected to surge from 57.3 per cent of the GDP in FY’10 to 61.8 per cent in FY’20.

Another major contributor to the growth would be rapid investment in the infrastructure area. Infrastructure sector spending is expected to rise to 12.1 per cent of the GDP by FY’20 from around 7 per cent of the GDP in FY’11.

Chengalpet, the gateway of Chennai city has been one of the fast developing municipalities in recent times because of the fact that it is transforming into an industrial hub. The province is situated just 60 kms from city and spread about

7,970 sq.km in area. Significantly, the town clutched the attention of well-known builders in the city namely Lancor, Arun Excello, Akshya Homes, L&T etc. Around 2 crore SQFT is being build to cater the residents moving here in next 2 to 4 years.

Mahindra group in association with Tamilnadu Industrial Development Corporation Ltd (TIDCO) established a business township near Chengalpet called “Mahindra World City” spreading across 2400 acre in 2005. Apparently termed as

“New Chennai”, it is the Chennai’s first integrated business city and India’s first operational Special Economic Zone. This township comprises top companies in the country such as Infosys, Wipro, Tech Mahindra, Capgemini, Mastek, Renault Nissan, Wabco-TVS, BMW, Brakes India, Timken India, Leather Crafts India and many more.

Auto major FORD is strategically located in Marimalai Nagar and is set to generate direct and indirect employment of 25,000 in coming years.

#2 Infrastructure

Air, Road and Rail networks have been expanded to provide handhold service to the public in South Chennai. New master plans were also proposed by Chennai Metropolitan Development Authority(CMDA) in terms of rail route that includes laying of the second lane between Chengalpet and Arakonam, which is about 60 km distance. Similarly third and fourth lane between Tambaram and Chengalpet (30km) have been also been proposed. It is hoped that Chengalpet will soon become a well equipped metropolitan city in next 2 to 4 years.

Hospitality major Ramada Hotel – Four Star Deluxe is coming up in Vandalur and should start operations in next 2 years.
Holiday Inn has also finalized to cater to South chennai growth by signing up in Mahindra World City. Plans are drawn
to start construction in December 2011 and start operating from 2013.
http://www.mahindra.com/News/Press-Releases/1308049247

#3 Educational Institutions

Chengalpet is equally endowed with top autonomous and affiliated educational institutions in the state, in particular SRM University, SRM medical college Hospital and Research, BS Abdur Rahman University (Crescent Engg College), Ambedkar Law College, Government Arts College and major schools. Consequently, Chengalpet town is being targeted most for urbanization taking all the above amenities into consideration, and it is sure to trigger its land value in near future.

Keeping this growth in mind, Krishna CitiSquare (KCS) are landscaping 2.75 lakh sq.ft of land by 2012.

Chennai is witnessing heavy growth in its southern and western peripheral areas, the Multi National companies situated near the site include Infosys, Ford Motors, BMW etc. Numerous colleges and residential townships are coming up around this area
The SEZ is accessible from Chennai city and Chennai Airport through road (NH – 45 or GST Road) and rail, the nearest railhead being Karunguzhi station on the Chennai – Villupuram Section

http://www.krishnacitisquare.com/keyplan2.html

Anyone who wants to build their home can get a financial assistance from Government up to 15 Lakh of rupees for a very minimum subsidy of one percent. This step by Government will definitely increase low cost housing communities across India. Previously it was Rs.10 Lakh and the ceiling value for building a Home is 20 Lakhs. Now it is liberalized to 15 Lakhs of rupees and ceiling value for building a Home is now 25 Lakhs.

Government gives the benefit for property developers who are constructing low cost affordable housing. Government is giving Income Tax Deduction under Section 80-IB. This will make more property developers interested to develop low cost housing and more people who cannot afford much for a home can really look to get a new home around 15 to 25 Lakhs of rupees.

Overall this is a new step taken forward by the Government to promote low cost housing in India, you can see most of the people in the construction industry  interested to build  low cost housing which will eventually benefit the people who can afford less money for building their homes.

Improving construction quality, enhanced market transparency, and availability of suitable options have made real estate a good asset class to invest in. It provides a stable and predictable income yield along with a possibility of capital appreciation . While residential markets in India have already witnessed a rapid bounceback , commercial markets had touched a cyclical low and are expected to recover.

The market value of investment-grade real estate in India under construction has increased from USD 69.4 billion at end-2006 to USD 101.3 billion by end-June 2010, which is 8.2 percent of India’s nominal GDP for 2009. A significant portion of this market value is costs of construction and development of these real estate assets. The costs have been assessed to be USD 48.5 billion over a period of 2-3 years.

The market value of commercial (office and retail) real estate under construction is USD 34.8 billion. Commercial office space under development contributes 74 percent of the estimated market value being developed in the commercial sector. As of the second quarter of 2010, Tier I cities of Bangalore , Mumbai , and NCR-Delhi contribute to 70 percent of the market value of commercial office space under construction , while Tier II cities of Chennai, Pune, Hyderabad and Kolkata contribute to 21 percent of the pie. Other investment-grade developments in Tier III cities contribute to a mere nine percent of the pan-India market value being developed in India today.

However, with infrastructural developments and lower real estate costs, the share of Tier III cities is likely to grow in future. While the Tier I cities contribute to 62 percent of the commercial retail space under development, 27 percent is supplied by the Tier II cities.

The residential sector has been the most resilient one in the recent downturn, aided by the high demand for housing in India. While residential property prices slumped in the first half of 2009, their rapid recovery in the second half of 2009 and first half of 2010 was accompanied by a slew of launches across India.

As of the second quarter of 2010, the market value of residential properties under construction is USD 66.5 billion , contributing 66 percent of the value of total real estate under construction in India.

While the premium segment comprises only four percent of the saleable area being developed, it contributes to 24 percent of market value. While NCR-Delhi leads in terms of volume of residential properties being developed, Mumbai contributes a larger share to the market value.

Foreign direct investment (FDI) in housing and real estate in India increased steadily from USD 0.04 billion in 2005-06 to USD 2.18 billion in 2007-08 . Since 2007-08 , a total FDI of USD 7.82 billion has been put into housing and real estate in India. Considering an average construction period of three years for properties, this comes to 7.7 percent of the market value of investment-grade real estate under construction as of the second quarter of 2010.

Senior bankers feel that RBI may either raise standard provisioning or risk weight on bank loans to real estate companies in the forthcoming policy on April 20. This will be aimed at protecting banks’ exposure to properties amid spiralling prices.

“If RBI does not raise cash reserve ratio and keep signalling rates like repo rate and reverse-repo rate untouched, my feeling is that it may tighten the prudential norms. A hike in risk weight, particularly on real estate loans, is not ruled out,” said SA Bhat, chairman and managing director of Indian Overseas Bank. As per the latest available data, banks exposure to commercial real estate is Rs 88,581 crore as on November 2009.

Risk weight is the capital that is set aside to calculate capital adequacy ratio, which is 9% for all banks. Banks have to set aside less capital for borrowers with higher credit rating. For a triple A clients, the risk weight is 20%, which means banks have set aside Rs 1.80 of its own capital for every Rs 100 loan to such borrowers.

But risk weight for real estate companies is 100%, irrespective of the rating; this means banks have to keep aside Rs 9 for every Rs 100 loan to builders. Chances are the regulator may raise this risk weight to 125% or even 150% in the forthcoming policy. To help builders and banks cope with the crises, RBI had lowered it to 100% from 150% during the downturn. But while doing this, RBI had indicated that these were counter-cyclical measures.

“Government and banks bailed out real estate companies by providing financing to them. The growth in this sector was higher than the overall credit growth, as a result, prices did not come off significantly.

Revival in the sector has resulted in real estate prices rising and now RBI may need to make an effort to cool down prices,” said Hemindra Hazari, head of research Karvy Stock Broking. On a YoY basis, loans to real estate sector surged 15.3% when overall credit rose 10.4% as on November 20, 2009.

Unlike personal loans, which grew only 0.7% as banks slowed down when customers began to default, they continued lending to builders. “It was financing a high-risk sector and was not justified…this resulted in real estate prices not dropping to the extent that they could have…more so, given the over supply in the market,” he added.

Some bankers think that RBI may raise standard provisioning on commercial real estate loan, which is now at 1%. It is the money that banks set aside from their earnings on standard loans to protect their books if the borrower defaults. Standard provisioning for manufacturing companies is 0.40%. Thus, on a Rs 100 loan to a real estate company, a bank has to keep aside Re 1 while only 40 paise has to be provided to a manufacturing firm.

After Lehman fell, standard provisioning on real estate was lowered from 2% to 0.40%. In November 2009, RBI raised it to 1% amid concerns that nearly 14% of loans to this sector was restructured.

In mid-term policy (October 2009), RBI had said: “Real estate prices have firmed up as has been the trend in several other emerging market economies. Increasing optimism about the recovery and high levels of liquidity are driving up real estate prices although they are still some distance away from the pre-crisis peaks